A pedestrian is reflected in a puddle of water as he walks along the Israeli barrier in al-Ram, on the edge of Jerusalem, Februa
A pedestrian is reflected in a puddle of water as he walks along the Israeli barrier in al-Ram, on the edge of Jerusalem, February 12, 2008.
Mahfouz Abu Turk / Courtesy Reuters


Recent public opinion polls show that a growing number of Israeli citizens support a two-state solution to the Israeli-Palestinian conflict, while also believing that a total separation of the two peoples is necessary—at least for a time. Separation is now seen as so important that a majority of Israelis even favor doing it unilaterally if need be. In the wake of the second intifada, much of the population has lost faith in negotiated solutions.

The same opinion polls indicate that most Israelis now believe that the fastest and most efficient way to achieve the separation they desire is through the erection of an electronic fence, and such a barrier is in fact already under construction. The fence will inevitably lead (at least initially) to an economic divorce between Israel and Palestine, which will create hardship for both sides until each economy becomes more self-reliant. But both peoples seem to favor such a course over living in a binational state that they could not be sure of controlling.

A growing number of Israelis now realize that demographic imperatives, and not just basic justice, dictate a two-state solution. The drastic decline in Jewish immigration to Israel in recent years—as well as the very high birthrate among Palestinians—has led population experts to predict that by 2020 or shortly thereafter, there will be an Arab majority in all the territory between the Mediterranean and the Jordan River. At that point, the land will cease to be "Jewish."

Israel's politicians have been quick to take note of the growing support for a complete division between the two peoples. Amram Mitzna, the new leader of the Labor Party, has called for an immediate Israeli withdrawal from Gaza and most of the West Bank, together with the building of a wall. His opponent, Prime Minister Ariel Sharon, has also backed construction of the fence (albeit reluctantly, and in the wake of mounting public pressure), but without letting go of the settlements.

The preference for unilateral separation over a negotiated agreement is the result of the reluctance of leaders on both sides to strive for a two-state solution. Neither Sharon nor Yasir Arafat seems to want such a result. The two men realize that a fence will be more than just a physical barrier. It will also play a psychological role, preparing their nations for separation from which there will be no return. Both Sharon and Arafat have therefore helped torpedo negotiations: on several occasions when talks seemed imminent, Sharon took steps that fanned the flames of Arab animosity and sabotaged Palestinian attempts at reform (including efforts to replace Arafat with leaders more inclined to make peace). And Arafat, for his part, has secretly—and at times not so secretly—encouraged terrorism against Israel, despite making repeated promises to rein in Hamas and other rejectionist groups.

There is another reason, less obvious but perhaps more powerful, why recent attempts to restart the negotiations between Israelis and Palestinians have failed: the legacy of the now-defunct Oslo peace process. Oslo allowed both sides to delay resolving fundamental issues such as land and water rights, without giving Israelis total security or the Palestinians a state. So much damage was done to both sides, and confidence was so undermined, that today all the alternatives to separation appear to have been discredited.

But separation, even unilateral separation carried out by Israel, should not be regarded simply as an act of frustration in the absence of negotiation. It could well be the best hope for peace in the region. Although it may be painful initially—indeed, the economic dislocation may be severe—separation should ultimately profit both sides. And it will help create the conditions that may ultimately lead to a final negotiated peace between Israel and the Palestinians.


It has now become obvious that Oslo—which represented an attempt to avoid the arduous and dangerous process of negotiating a detailed, final peace plan between Israel and the Palestinians—was, in part, a blunder. The 1993 declaration of principles allowed both sides to ignore many of its terms: in the case of the Israelis, by continuing their massive effort to establish settlements in the West Bank and Gaza, and in the case of the Palestinians, by disregarding their commitment not to arm themselves or engage in violence.

Observers usually blame the "humiliation of occupation" endured by the Palestinians for the savage terrorism they have mounted in the years since the Oslo agreement was signed. Although psychological factors may indeed have played a major role in these events, however, it was the negotiators' failure to grapple with some of the issues underlying the conflict that has been a much more important trigger for the bloodshed than many experts are willing to admit.

Oslo was premised on the principle of "sliding into peace." Its negotiators were convinced that the more both sides enjoyed the fruits of the initial agreement, the more flexible they would become regarding what were once thought the most divisive questions: namely, settlements, borders, Jerusalem, and control of the holy places. The Oslo agreement was also based on the idea of an eventual economic union between Israel and the future Palestinian state.

All of these premises, however, have turned out to be flawed. The idea of an economic union is an oversimplified concept that sounds good to politicians and theoretical economists but is highly problematic in practice. The notion is so attractive that even the un's 1947 partition resolution called for the establishment of two states joined together by just such a union. The idea was that Palestine, as a territorial unit, was too small to justify the existence of two separate economies. Unfortunately, plans for an economic union ignore the regional realities of the past 100 years: the mutual suspicions, the uneven economic potential, and above all, the failure of Israelis and Palestinians to ever agree on how to divide their meager natural resources such as land and water—resources that both sides regard as essential to their very existence.


The struggle over land has always been the core of the conflict between Jews and Arabs in Palestine. Today that legacy takes the form of bitter resentment on both sides—resentment that Oslo ignored but that must be addressed by any final settlement.

Although they lacked political sovereignty under Ottoman and British rule, Palestine's Arabs felt some security and even a sense of national identity for as long as they held control over most of the land. This control began to slip and local anxiety increased, however, when Arab landowners, some of whom lived outside Palestine, began selling large tracts of land to Jewish settlers. In some cases, Arab tenant farmers were unceremoniously evicted from plots their families had tilled for generations.

At the time, the economic potential of a country in such an arid part of the world was thought to depend on the quantity of arable land available for fallow farming. Based on this concept, the British Mandatory Authority adopted "absorptive capacity"—namely, the amount of additional farmers the local agriculture could support—as a yardstick to determine how much additional Jewish immigration to allow into Palestine. In 1939, with the land question becoming ever more explosive, the British issued a regulation preventing Jews from purchasing land in certain areas of Palestine. This discriminatory act was a failure, however: it not only infuriated Jews, who compared it to the antisemitic Nuremberg Laws adopted in Germany four years earlier, but it also encouraged Arab nationalists to increase their demands. No similar discriminatory legislation was ever passed again.

The establishment of Israel in 1948 seemed finally to grant the Jews a unique opportunity to fulfill their aspirations for massive land acquisition. The newly created Israel Land Authority was given the task of administering the hundreds of villages abandoned by their Arab inhabitants, as well as all land owned by the Israeli government and the Jewish National Fund (JNF). Although the JNF contributed no more than 18 percent of the land controlled by the Israel Land Authority today, it still maintains 50 percent control in all Land Authority bodies. This dominant position has resulted in gross underrepresentation of Israeli Arabs (who make up 20 percent of Israel's population) and much discrimination against them—especially in the expropriation of land for government purposes.

Israel has also expropriated land over the years for the establishment of settlements in the West Bank and Gaza, invoking the right of eminent domain. As a result, in the Gaza Strip—which has one of the highest population densities in the world—about a dozen Israeli settlements now occupy 40 percent of the arable land. Given this long and bitter legacy, it is hardly surprising that, from the Palestinian perspective, Israel will have to do more than remove its settlements before a final peace can be reached. The question of land rights was one of many major subjects that the Oslo agreement intentionally avoided, and any future agreement between Israel and Palestine will have to resolve it conclusively.


Although Israel is part of the "fertile crescent" that stretches from Mesopotamia to the Nile, the shortage of water has always been a dominant factor in the existence of the local population. The Bible tells of conflict between Abraham and Avimelech, the king of Grar, over wells needed for their sheep and goats, and the situation has hardly improved in the centuries since. Indeed, things were little better a hundred years ago—even though the population was much smaller then, the standard of living (and thus the level of water consumption) much lower, and agriculture more primitive.

Once they arrived in Palestine, Jewish settlers dug wells, built water reservoirs, and, in the 1950s, undertook ambitious irrigation projects, bringing water from the Sea of Galilee in the north to the Negev Desert in the south. Although this may have allowed Israel to partially realize the Zionist dream of "making the desert bloom," it has now become evident that the pumping was overambitious and grossly wasteful. Israeli water experts overestimated the size of the country's reserves—in part due to political pressure from Israel's powerful agriculture lobby, which insisted on using precious water for thirsty crops such as cotton. The situation was then exacerbated in 1967, when Israel gained control over the West Bank and Gaza and began to overexploit the mountain aquifer in the center of the country. Photographs from the era show Israeli children splashing around in swimming pools in some of the newly established settlements, while in towns such as Hebron, the pipes began to run dry in summer and water for basic human needs had to be supplied to households by tankers (a situation that continues to this day).

The declining cost of desalinated sea water now seems to be the only hope for Israel and its neighbors to solve their permanent water shortage. Several desalination plants are already under construction in Israel, and these may partially alleviate the crisis. Yet any progress toward peace between Israel and the Palestinians will require a detailed agreement for the equitable division of all available sources of water, starting with the Hatzbani River and its tributaries in Lebanon, the sources of the Jordan River in Syria, and all water presently pumped from aquifers in Israel and the West Bank. Oslo, unfortunately, ignored these water questions. Now a formal agreement, or at least an understanding in principle, on how to allocate the region's insufficient water supply will be critical in order to reach a political solution between Israel and the Palestinians.


As mentioned above, the Oslo agreement was based on the concept of "sliding into peace"—a concept that was used by both sides to justify avoiding controversial questions such as borders, Jerusalem, settlements, land and water rights, and the future economic, social, and political relations between the two states of Palestine. Such matters were either erroneously thought out or not thought out at all.

The most blatant of these sins of omission was the Paris agreement of April 1994, which outlined the future economic relations between Israel and the newly formed Palestinian Authority (PA). Although the agreement was termed "temporary," its signatories knew very well that it would set the pattern for all future relations between the two states. Since Israel insisted that there should be no border demarcation between areas under its control and those ruled by the Palestinians, there was no way to avoid massive smuggling of goods between the various zones. Therefore, different rates of import duties and excise taxes had to be avoided.

The Palestinians reluctantly agreed that Israel would collect customs and excise duties on their behalf. Since these taxes were to become the PA's main source of revenue (income tax collection in the Palestinian territories is negligible), the agreement drastically reduced the Palestinians' control over their economy. The agreement also allowed Israel to retain control over infrastructure services such as electricity, gas, fuel, and telecommunications.

Palestinian merchants, however, were to be allowed to move freely in Israel in order to buy and sell merchandise. And work in Israel for more than 100,000 Palestinian workers was to become a major source of income for Palestine. The advantage for Israel would be that the Palestinians would return home every night, eliminating the danger of their remaining for long periods inside Israel proper, as do foreign workers from other parts of the world. Another boon to Israel was that, although the PA was not prevented from imposing protective tariffs, the Palestinian market soon became a most convenient one for Israel's industrial products. In many cases, having Palestinian markets nearby enabled Israelis to reach economies of scale that made it possible for them to sell their products elsewhere, in places where they had not previously been competitive.

The Paris agreement also provided many short-term advantages to the Palestinians. The money earned by Palestinians working in Israel, as well as the customs and excise duties collected for the PA by the better-organized Israeli tax authorities, became the PA's most stable sources of cash. And although it is difficult to assess the exact influence of the agreement on the Palestinian economy, the years immediately preceding and following its implementation were by far its best. The GNP rose, as did the standard of living, and capital began to flow into Palestine from both charitable and economic sources.

The basic flaws of the Paris agreement soon became apparent, however. Conceived at the high point of globalization, the thinking behind the agreement owed much to the visionary theories of Shimon Peres, Israel's veteran statesman. In his New Middle East doctrine, Peres envisioned that Israel would help lift all Middle Eastern countries out of their misery by providing them with technology and helping them obtain financing from the world community. Peres also hoped that the special relations he had built with King Hassan of Morocco and with some Persian Gulf states would enable Israel and the Palestinians to get involved in regional development projects.

Peres' theory, however, was naive and did not foresee some of the destructive side effects of globalization. In the case of Palestine, he overlooked the deep gaps in development and the standard of living between Israelis and Arabs. If such a gap is too great, economic association soon becomes exploitation—even with the best intentions. This lesson had been learned the hard way in the European Union, where it was found that if the gap between a new member and other EU nations was too wide, the association would not succeed. The weaker country must maintain its own economic independence until all sides can be sure that union will not eviscerate the economic institutions of the weaker country.

Even before the Paris agreement was signed in 1994, economists had begun to warn that a real economic dialogue between the two sides could become a reality only if the gap between their annual per capita GNPs—which, at that time, was $14,000 in Israel and only $2,000 in the West Bank and $800 in Gaza—was drastically narrowed. Politicians, unfortunately, ignored this warning.

The danger posed by this failure was nowhere more obvious than in employment. Since many Palestinians still live off the land and are not part of the area's labor force looking for work, long-term employment of 100,000 Palestinians in Israel would deprive Palestine of much of its major natural resource—a resource that should have been absorbed by it own industry instead. The longer the Paris agreement remained in force, the deeper economic integration between the two sides became, mostly to the detriment of the Palestinians. The benefits both sides had derived from their many years of separation were soon forgotten.

Starting in 1936, as a result of the Arab boycott and the efforts of local Jews to establish their own institutions, each community had become quite independent economically. The Jews learned to grow their own food and establish industries and infrastructure, and the Palestinians—despite having to bear the burden of 20 years of Jordanian occupation and of the refugee camps established after 1948—also established an independent economy. After the war of 1967, when Israel occupied the West Bank and Gaza, most of the economic barriers between the two communities collapsed. What few roadblocks remained were dismantled by the Paris agreement that followed Oslo, and the Palestinian economy became even more dependent on Israel's.

To be fair, the Paris agreement never had much of an opportunity to work the way it was intended to. As Ephraim Kleiman, a professor of economics at Hebrew University and an adviser to the Israeli negotiating team points out, the series of closures Israel began to impose on the Palestinians in 1995 in response to the growing wave of Palestinian terror limited economic contact and may have further contributed to the Palestinian economic slowdown that began that year. Independence now may make it much easier for Palestine to mobilize investments, loans, and know-how from foreign sources—especially from the oil-rich Persian Gulf Arab states. It will also force the Palestinians to figure out how to increase domestic entrepreneurship. Independence may even, in the future, allow Palestine to negotiate an economic cooperation agreement with Israel under much better terms than the 1994 Paris agreement.


The first plans for a unilateral physical separation between areas settled by Jews and Arabs were actually made long before the beginning of the second intifada in October 2000. Contrary to what many people outside Palestine remember, the seven years after the signing of the Oslo agreement in September 1993 were not quiet at all, but marked by constant Palestinian terrorism. The subject of a fence thus began to be raised by the Israeli government as early as March 1995, when a suicide bomber killed 21 Israeli soldiers at a bus stop near Netanya. The goal of the fence was to make various closures more effective and to drastically limit the entry of Palestinians into Israel.

Discussion of the fence began in earnest in 1996, when it was raised by the minister of internal security at the time, Moshe Shahal (a member of the then ruling Labor Party). Shahal suggested the construction of a 300-mile, electronically controlled barrier with seven or eight crossing points. Although security and police experts supported his plan, it was soon shelved by Shahal's superiors. The governments of Prime Minister Yitzhak Rabin and, even more so, of Shimon Peres (who succeeded Rabin after his assassination in November 1995) were not yet ready to give up on the dream of "a New Middle East," in which the emphasis was placed on integration, not separation. Meretz, Israel's leftist party, also balked at unilateral separation, arguing that direct negotiation was the only way to solve the conflict.

The Rabin and Peres governments also held an attitude toward Arab terrorism quite different from that of their successors. Both prime ministers refused to let violence deter progress toward peace and stuck to the slogan "We must fight terror as if there are no hopes for peace and we must strive for peace as if there is no terror." The outbreak of the second intifada and the intensification of Palestinian violence has since greatly diminished the popularity of these slogans. It is worth noting, however, that when Mitzna was elected chairman of the Labor Party in November 2002, he adopted essentially the same position, rewording it as "We shall fight terror as if there are no negotiations and we shall negotiate as if there is no terror." He added, however, that if it becomes clear that negotiations are not possible, Israel should resort to unilateral separation.

When Sharon became prime minister, succeeding Ehud Barak in early 2001, he advocated a policy very different from Labor's: no negotiations without a total cessation of violence first. "We cannot be expected to negotiate under fire," Sharon said. Although this policy won the support of the Bush administration, its fatal flaw soon became obvious: it gives a veto power to the most extreme among the Palestinian terror groups. Under Sharon's policy, a single act of violence perpetrated by a marginal group can block peace talks for an unlimited period. It was thus subsequently decided to limit the condition of an "obligatory cease fire" to two weeks, and then to a week.

These modifications, however, have been to no avail. Indeed, after two years of extreme violence between Jews and Arabs, it has become obvious to both sides that a total separation, a "cooling off" period, is urgently needed. This is precisely what a fence would provide. Moreover, total physical separation may actually enable more effective international mediation that could eventually lead to a final peace agreement between Israel and the Palestinians. Although Palestinian terrorist incursions into Israel may still take place even after separation, their number and effectiveness can be expected to be much more limited.

Meanwhile, after every suicide bombing over the last few months, the voices within Israel calling to speed up the fence's construction have grown louder. Not only has the president of Israel, Moshe Katzav, expressed his support, but even Binyamin Netanyahu, Sharon's rival in the Likud Party, has demanded that all available resources be diverted to building the barrier. Mitzna and the Labor Party even made it one of their major issues in the run-up to the general elections on January 28. Accusing Sharon of dragging his feet, Mitzna admitted that completion of the first stage of the fence—now scheduled for later this year—would probably not solve all of Israel's security problems. For one thing, the fence will be short: only 100 miles, a third of the total length of the Israeli-Palestinian border. Determined suicide bombers may still be able to get across. Even before the first segment is completed, therefore, there may be a decision to extend it. Yet the fence around the Gaza Strip, which has existed for several years, has already proven valuable. No suicide bomber has come from Gaza since its completion, and in November 2002, Gazan suicide bombers headed for Israel were forced to try to get there by sea, where they were intercepted and sunk by the Israeli navy.

The completion of the first segment of the entire West Bank fence, which will run from Beit She'an to Arad, should not only provide greater security but also have other, equally important positive effects. It should convince both sides that a two-state solution has become the only viable option, and that they should stop their often violent efforts to sabotage such a resolution. Complete separation will reduce Israel's dependence on Palestinian workers and Palestinian dependence on employment in Israel. Of course, this may hurt the two states in the short term, since both sides have become dependent on each other despite the violence. The Palestinians may be the bigger losers, but some economists believe that in the long run, even they will profit from separation by becoming more self-sufficient.

Psychologically, separation will provide both sides with breathing space for several years during which, free from the pressure of ongoing violence, fundamental problems such as the equitable division of land and water and the nature of future economic and social relations can be dealt with. Issues that until recently seemed the main sticking points, such as borders, Jerusalem, and the right of return for the Arab refugees of 1948, may prove easier to resolve once agreement is reached on more fundamental topics.

Israelis who remain opposed to the fence can be divided into two groups: those who do not believe in a two-state solution and would like to "uproot" Palestinian terror through military action, and those who would like to see a separation from the Palestinians but believe that the Israeli settlements are an irreversible factor that will make a fence impractical. This latter camp would like to see a negotiated settlement leading to an "equitable solution" to the settlement question: namely, an evacuation of the outlying settlements in return for the extension of the Israeli border to include settlements in the Ariel area and in Gush Etzion.

Supporters of the fence, meanwhile, also fall into two groups. The first believes that an internal Israeli clash over the future of the settlements is coming and will occur when the fence is completed. This group, moreover, is convinced the fence will not be able to keep out suicide bombers if large numbers of Jewish settlers continue to cross it every day on their way to work inside Israel. Thus the retired general Dan Rothschild, who for many years was the coordinator of Israel's activities in the West Bank, now leads the growing pro-fence movement but believes that if Israeli guards are forced to screen 30,000 Israeli vehicles a day (the current level of Jewish traffic in and out of the territories), they will have little chance of keeping out terrorists. Most of the settlements, he argues, will therefore have to be disbanded.

Another group of Israelis, somewhat more optimistically, believes that separation may induce large numbers of settlers, especially those in isolated settlements, to give up their homes voluntarily. A survey completed in October 2002 revealed that in the preceding year, more than 20,000 settlers had returned to Israel as a result of economic and security considerations. Supporters of voluntary separation believe that generous compensation, possibly supported by outside sources, could speed up this departure of the settlers. Such a process will be difficult and in many cases heartbreaking, yet it remains imperative for the future of Jews and Arabs in Palestine.

Because unilateral separation will, one hopes, be temporary, the borders set by the fence can be adjusted when a final agreement between Israel and Palestine is reached. This will be especially necessary where the fence splits villages in two and if it is agreed that certain Israeli settlements that now fall east of the demarcation line should be included within Israel.

Not all aspects of separation should be temporary, however. No one expects that the daily influx of tens of thousands of Palestinian workers into Israel will be renewed, and much of the economic separation will remain. Many Israelis have already started to argue as much, noting the positive experiences of Israel prior to 1967. The Palestinian market does not consume many of the mostly sophisticated products Israeli industry now produces, and, like so many developed countries trying to limit the entry of foreign labor, Israel would be better off without dependence on Palestinian workers.

For its part, the Palestinian economy, already in ruins after more than two years of a devastating war with Israel, can be expected to suffer more. Despite its reservoir of semi-skilled workers, the Palestinian economy needs Israel—its ports, infrastructure, and technical assistance—as a bridge to markets in the West. Arab markets, including those of the oil-rich Persian Gulf states, offer little promise to the economy or workers of Palestine. And hopes that Palestine would become the "Singapore of the Middle East" now seem like pipe dreams amid the grim reality of 2003.

Some Israeli economists, however, such as Zvi Sussman, former deputy governor of the Bank of Israel, are more optimistic. They believe separation will be a blessing in disguise for the Palestinian economy. Sussman says that the Palestinians "need a period in which their economy will learn to fend for itself, with international help, of course." To this end, he has even urged the Palestinians to strive for their own independent currency.

Even the Israeli economy will need time to adjust to separation and to being deprived of cheap labor. Israel will have to learn to import rather than produce labor-intensive crops such as tomatoes, cucumbers, and melons. Still, Israeli entrepreneurs hope to establish workshops and factories in Palestine, similar to those they have already established in Jordan and Egypt, where Israelis mostly handle the design, engineering, and marketing, and local workers supply the labor. It can therefore be expected that some interrelationship will develop between the Israeli and Palestinian economies. Hopefully, these links will develop gradually—as the idea of two states for two peoples takes hold and clears the way for a real peace.

In sum, then, even as de facto or unilateral separation achieves concrete gains, it will also help both sides rid themselves of the ghosts of the past. In 1999, the Palestinians turned down the peace plan proposed by President Bill Clinton because it did not address the issue of Palestinian refugees of the 1948 war. Of course, the idea of allowing any number of them to return to Israel proper is a nonstarter for Israelis, whether on the right or on the left, who fear that their state would be flooded by Arabs. In future peace negotiations, after separation has become a fact, Palestinians may be prepared to address this subject in more realistic terms.

Apart from relatively small groups of Palestinians who believe in "total victory" and Israelis who claim that Palestinian terror can be "uprooted," Israelis, Arabs, and the world at large have already come to accept that there can be no military solution to the bloodshed in Palestine. That recognition alone, however, has not been sufficient to achieve real peace. The experience of the bitter conflict shows that peace can be achieved only in two stages—the first of which should be separation between the two sides, unilateral if necessary.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now
  • YUVAL ELIZUR is a veteran Jerusalem-born journalist and author. He was Deputy Editor of Maariv, Israel's mass circulation daily, as well as Israel Correspondent for The Washington Post and The Boston Globe.
  • More By Yuval Elizur